In This Issue Bush Halts Regulatory Activity New Direction at OMB President Clinton's Last Budget Report The "Fuzzy Math" Behind Bush's Proposed Tax Cut Membership Set for Tax Writing Committees Which Charities Benefit from the Estate Tax Campaign Finance Amendments and Nonprofit Lobbying IRS Releases Regulations On Excess Benefit Transactions Clinton Administration's Final Report on E-Commerce Clinton White House Web Moved to NARA Agencies Directed to Archive Websites Chemical Accident Right-To-Know EPA Seeks Public Input on Public Participation Process Tech Help: Internet Telephone Services Letter to the Editor: Estate Tax Series Bush Halts Regulatory Activity In one of his first moves as president, George W. Bush issued a memorandum temporarily prohibiting agencies from publishing new rules in the Federal Register, effectively blocking last-minute regulatory actions by the Clinton administration. Among the blocked regulations include restrictions on runoff from animal feeding operations, more than 800 pages of new guidelines for managed care programs under Medicare, and a requirement for producers of hot dogs and other ready-to-eat meats to conduct periodic testing for listeria bacteria, which sickened 100 people and killed 21 others during an outbreak several years ago. Also part of the memorandum, Bush ordered a 60-day stay of rules that were published in the Federal Register toward the end of the Clinton administration, but have not yet taken effect. This includes many important protections for public health, safety, and the environment, including ergonomics standards, diesel fuel regulations, and a ban on new roads in millions of acres of national forests. Final rules such as these cannot simply be wiped away with the stroke of a pen. The agencies that issued the rules would have to undertake a brand new rulemaking - going through all the hoops and hurdles the law requires - to take them off the books. This is a difficult task, and one that Bush - given his questionable political standing - should not take lightly. Yet it seems to be the direction he is heading. Older regulations are actively under review by the incoming administration, and many may be rescinded, Bush aides told the AP. It is interesting to note that the Bush administration is approaching its review of public protections with a bias toward rescinding. This is not surprising given the heavy representation of business lobbyists on the Bush transition team. But it is exactly the wrong approach - and it prejudges the process. In areas where public health is endangered, lives are at stake, and the environment is at risk, Bush should ask what more can be done. Instead, it seems he is asking his friends in the business lobby, who contributed heavily to his campaign, what he can do for them. Back to Top New Direction at OMB President Bush’s nominee to head the HREF="http://www.whitehouse.gov/omb/">Office of Management and Budget (OMB), Mitch Daniels, will be confirmed. That seems all but assured after the cordial confirmation hearing held by the Senate Governmental Affairs Committee on Friday. What’s much less clear is the direction Daniels will take OMB. On a host of issues, Daniels – who is an executive at Eli Lilly and Company and former official of the Reagan White House – indicated he has much to review and that decisions on many major items have yet to be resolved. These decisions will be critical, and not just to OMB, but to the entire federal government. As was pointed out during the confirmation hearing, OMB has vast, far-reaching powers – powers that often go unnoticed by the public. Specifically, Daniels faced questions (including written questions submitted prior to the hearing) dealing with: Budget & tax cuts. OMB is responsible for making economic forecasts and putting together the administration’s budget request to Congress. In this role, Daniels committed to moving forward with President Bush’s campaign pledge to cut taxes by an estimated $1.6 to $2 trillion over 10 years. A number of senators – including Sens. Joe Lieberman (D-CT), Carl Levin (D-MI), and George Voinovich (R-OH) – argued that such a large tax reduction would leave little money for debt reduction and other spending priorities laid out by the president, such as defense. Daniels disagreed, but did say that debt reduction would be a high priority of the administration. Daniels also said that Medicare reform would be high on the administration’s agenda, and that he did not favor putting Medicare dollars into a "lock box," similar to what has been proposed for Social Security. Also of note, Daniels confirmed President Bush’s desire to move to a biennial budget cycle. Regulation. OMB’s Office of Information and Regulatory Affairs (OIRA) is responsible for reviewing regulations under an executive order issued by President Clinton. Daniels was asked if he favored changing the Clinton E.O. in ways that would revert to earlier executive orders that were in effect under Presidents Reagan and Bush. Specifically, Levin asked if a new executive order would still require OMB to notify the public when it has received a rule for review. This has been the case under Clinton, but was not the case under Reagan and Bush, which led many to criticize OMB as a secretive, unaccountable regulatory black hole. Daniels said no decision has been made on revising Clinton’s E.O., and would not commit to any specific disclosure requirements. However, he did offer general praise for the new openness under President Clinton, and said he would work with the Governmental Affairs Committee – including Democrats – should the administration decide to alter Clinton’s executive order. Management & government performance. OMB oversees government management generally and has specific responsibility for overseeing implementation of the Government Performance and Results Act (GPRA), which requires agencies to measure performance and report on results in quantifiable terms. A number of senators complained that OMB has previously neglected its management function, and has focused too heavily on the budget. Sen. Fred Thompson (R-TN) asked whether the management function should be separated out from OMB. Daniels strongly disagreed with this approach, and said he is supportive of the Clinton administration’s efforts to integrate OMB’s management and budget functions. However, Daniels did say there was much room for improvement. Specifically, he said implementation of GPRA would be a high priority – although he also said he still needs to better familiarize himself with the issues involved – and that "performance reporting can be better integrated with the budget process, including OMB’s budget reviews." Information policy. Under a number of laws, OMB has responsibility to promote governmentwide dissemination of information. Daniels committed to pushing forward with a campaign proposal by President Bush to have OMB’s deputy director for management also serve as the government’s chief information officer (CIO). Daniels said this would highlight the transition to electronic government. "I see the goal of digital government as involving access to government information and services 24 hours a day, 7 days a week, in a way that is focused on the needs of citizens and business," Daniels explained. "Digital government involves the re-design of existing business process around these new technologies to take advantage of their ability to interact with the public quickly and easily." Procurement. OMB has an important role in shaping government procurement policy. Daniels was asked whether he agreed with a recent final rule by the Clinton administration that requires government contracting officers to consider a company’s record of complying with the law – including tax, labor, employment, and environmental laws – before awarding a contract. Daniels said he has "serious concerns about the possible impact of this regulation," but that the administration has made no decision about how to approach it. Back to Top President Clinton's Last Budget Report The Office of Management and Budget (OMB) issued its "Fiscal Year 2002 Economic Outlook, Highlights from FY 1994 to FY 2001, and FY 2002 Baseline Projections" on January 16 for "the benefit of the new Administration and the public." (And the new Administration has already taken issue - see article below.) The document includes an economic overview, a presentation of budget baseline estimates, a review of the positive highlights of the Clinton Administration, and President Clinton's policy recommendations to the new Administration. It is well worth a browse - a chance to see how President Clinton evaluates his budgetary accomplishments during the past eight years as well as his recommendations to President Bush for the work that remains. Briefly, the former President projects that Federal budget surpluses will continue for years to come. The budget surplus for the ten years from 2002 to 2011 is estimated at close to $5 trillion ($4.996 trillion). This forecast is based on GDP growth averaging about 3.3 % for most of the next decade (3.2 % for the next five years, dropping to 2.9 % in 2009). How did we get such a huge surplus? President Clinton says that this extraordinary good fortune resulted from outstanding economic growth, including low unemployment, high national savings, reduced interest rates, and faster productivity growth than anyone imagined. In addition, though, he notes that another reason is a drop in federal spending. This is a little remarked upon fact. The report states that Federal spending (including both defense and nondefense) has shrunk from 22.2 % of the GDP in 1992, down to 18.3 % in 2000, the lowest since the 1960's. And remember, since this includes both defense and nondefense programs, the drop in domestic spending is even more dramatic. While the argument being made in this report is that this decrease in government spending has not been at the expense of government investment in the nation's priorities, many working and low-income families might take issue. This nation continues to have unacceptably high rates of children in poverty, homelessness, and lack of pre-school, childcare and after-school programs. Many Americans cannot afford basic health care. Many legal immigrants, even those who are working and paying taxes, remain ineligible for nutrition and health insurance coverage. These are needs that remain on the table. After a discussion of the accomplishments of the Clinton Administration, the report closes with a list of areas where additional work is needed - President Clinton's recommendations to the new Administration, including, among others:

• Providing prescription drug coverage under Medicare
• Ensuring equity for legal immigrants
• Increasing the minimum wage to help working families
• Providing a Medicare buy-in option for children with disabilities
• Striving to hire 100,000 new teachers to reduce class size
• Helping schools with the resources to construct and modernize schools
• Expanding and improving the quality of the Head Start program

This is a good starting point for a politics of compassion and one that we can add to. Now is the time to start thinking about our priorities for the budget for the coming four years. Back to Top Fuzzy Math? In addition to the overt recommendations made to the new President in President Clinton's FY 2002 Economic Outlook, the numbers in the document also rather clearly argue against the affordability of President Bush's proposed tax cut. While a $5 trillion surplus over the next decade is projected, the following conditions would reduce that surplus to only $1.6 trillion:

• If spending grows with inflation - discretionary spending is estimated to grow with inflation,
• If the Social Security and Medicare surpluses are locked away for debt reduction, and
• If the cost of some programs that must be renewed yearly are in fact renewed. (Projections can be made according to current law, so, if a program is set to expire, its expense was not included. This report includes the costs of programs that are set to expire, but will likely be renewed.)

According to some estimates, President Bush's ($1.3 trillion) tax cut will actually be in excess of $1.9 trillion (including the loss of revenue and interest costs) over the next ten years, more than the available surplus. The Center on Budget and Policy Priorities has estimated an even higher cost of $2.1 trillion. We can expect some sharply different estimates from President Bush, both in terms of economic projections and in the cost of his tax cut. What do we think? No matter how you do the figures, a tax cut that is not primarily targeted to the needs of lower- and middle-income families, but would benefit higher-income Americans more, is the wrong way to go, especially now that income inequality in the US is on the rise. Back to Top Membership Set for Tax Writing Committees: A New Era of Bi-Cameralship? The membership for the House and Senate tax writing committees has been set. Rep. Bill Thomas (R-CA) has been selected as the new chair of the House Ways and Means Committee and Sen. Charles Grassley (R-IA) will head the Senate Finance Committee. Because of the evenly divided Senate, the Finance Committee membership is evenly split between both parties. The new Democrats on the Committee are Democratic Leader Tom Daschle, John Kerry, Robert Torricelli, Blanche Lincoln and Jeff Bingaman. New Repiblicans are Jon Kyl and Olympia Snowe. In the House, two new Republicans are on the Ways and Means committee, Paul Ryan and Kevin Brady. The Democrats are scheduled to meet on January 30, 2001, to determine Democratic membership of committees. It is expected that no new Democrats will be added. Senator Grassley has pledged to work closely with the House committee, even to the point of holding joint hearings on some topics. House and Senate Republicans may be forced to work more closely to get their policy priorities through, because of the even partisan divide. In an interview with The Hill, a newspaper covering Congress, Grassley stated that early priorities for the committees include a patients' bill of rights, opposing Sen. McCain's (R-AZ) effort for quick action on campaign finance reform, and cautioning against major tax cuts as a tool for stimulating the economy. Also of interest to the nonprofit community, Kyl has stated that he would use his position on the committee to push for repeal of the Estate Tax, an effort which is also supported in the House Ways and Means Committee by Rep. Thomas. (For more information on the Estate Tax, see next article and OMB Watch's Estate Tax Resource page.) Back to Top Which Charities Benefit from the Estate Tax In the last OMB Watcher we explained the connection between the estate tax and charitable giving. Charitable bequests equaled $14.3 billion in 1997. It is expected that repeal of the estate tax would mean a loss of at least $5 billion in charitable giving, but could be much higher. This is likely because charitable bequests have been rising substantially as wealth has increased. In this article we look at which charities would likely be most affected by repeal of the estate tax. It is difficult to be precise because there is a paucity of data. The Treasury Department, however, has published 1995 data on charitable bequests in its 1999 Statistics of Income Bulletin. The largest number of charitable bequests went to religious institutions (58.8 %), but the largest dollar amounts went to educational, medical, or scientific institutions and private foundations. (See figure below.) Chart: Charitable Bequest Recipients: 1995 SOURCE: IRS, Statistics of Income Bulletin, Summer 1999, Publication 1136 (9-99). Nearly the largest amount of money went to private foundations – $3.1 billion in 1995. Roughly one-third of foundation assets come from estate revenues, particularly from larger estates. Thus, it can be expected that repeal of the estate tax would have a significant impact on foundations. This would mainly affect the creation of new foundations or enlargement of existing foundations, but would inevitably have an impact on yearly giving by foundations. Educational, medical or scientific institutions would be greatly affected by repeal of the estate tax. In 1995, these institutions received $3.2 billion. This would likely directly affect charitable bequests to higher education institutions and medical facilities. The "Other" category in the figure above includes a range of social service organizations and other charities that are not covered by the remaining categories. In 1995, estates provided $2.5 billion to "other" charities. Repeal of the estate tax would likely have a significant impact on many human service charities that rely on gifts and bequests from wealthy donors. It would also likely have a major impact on cultural institutions such as our museums and symphonies. Based on the Treasury Department data, it appears that "social welfare" charities – those promoting civil rights, community development, social science research, or government effectiveness – would be the least affected by repeal of the estate tax. However, these groups are often heavily dependent on private foundations for support. Given the repeal of the estate tax would dramatically impact private foundations, these types of charities would also be significantly affected by repeal of the tax. In addition to the repercussion repeal of the estate tax would have on charitable bequests, the tax repeal would have other impacts on nonprofits. In FY 1999, the gift and estate tax provided $28.4 billion in revenue to the federal government. This is expected to exceed $30 billion in FY 2000. Discretionary spending in FY 2000 was $617 billion. Thus, repeal of the gift and estate tax could mean a 4.6 % cut in discretionary spending. Traditionally, cuts in discretionary spending are seldom made in military spending. Given the Bush administration's commitment to increases for defense spending, these cuts will need to be made in domestic discretionary programs, which accounted for $322 billion in FY 2000. It is not uncommon for such cuts to be made in programs with constituents who have less political clout. Usually this means human services, primarily targeted to low-income families. It is possible that the loss of revenue from the estate tax could come from the budget surplus. If so, this would mean little opportunity to increase domestic discretionary spending. In the end, it will mean that the super-rich get a tax break while the less fortunate get nothing - and possibly could suffer. Since nearly one-third of charity revenue comes from government support, the repeal of the estate tax would have a triple-whammy on charities. It would mean less money in through charitable contributions, reduced grants from private foundations, and less money in government support. Back to Top Campaign Finance Amendments Could Have Unintended Consequences For Nonprofit Lobbying and Public Education Sen. John McCain (R-AZ) has made it clear that he and co-sponsor Sen. Russell Feingold (D-WI) will introduce their campaign finance reform bill in the week following the inauguration of George W. Bush, and push for immediate consideration. A filibuster led by long time reform opponent Sen. Mitch McConnell (R-KY) is unlikely, given the change in the makeup of the Senate. McConnell told reporters that new tactics are needed now that there is a new President. He hinted that Bush may veto a reform bill if he does not believe it is balanced. Senate GOP leaders want to delay consideration of campaign finance reform until the new President has a chance to push his legislative agenda. However, McCain continues to push for early consideration, noting that the early weeks of the session will be tied up with the confirmation process. McConnell has stated support for a lengthy debate with full consideration of amendments and impacts of various proposals. Amendment drafts are already starting to circulate. They include detailed disclosure requirements for nonpartisan get-out-the-vote and voter registration activities that take place within 120 days of a federal election, and any activity within 60 days of an election that supports or attacks a candidate for federal office, even if statements do not expressly advocate their election or defeat. Another proposal would deem any communication that refers to a candidate for federal office made within 60 days of a federal election to be electioneering, subject to the Federal Election Campaign Act. While these proposals seek to restrict "sham" issue advocacy that is intended to influence the outcome of federal elections, they could easily sweep in legitimate legislative lobbying, regulatory advocacy, public education, fundraising and other fundamental activities of charities, social welfare organizations and labor unions. For example, if a charity that supports campaign finance reform airs a public service announcement on the radio to advertise a fund raising event within two months of an election involving either McCain or Feingold, and the announcement refers to the McCain-Feingold bill, the group would be "electioneering" because they have identified a federal candidate. Since charities are prohibited from "electioneering" under tax law, such a finding could cause problems with the Internal Revenue Service (IRS) and risk their tax-exempt status. Even if the IRS does not apply this standard, it creates inconsistent definitions of what is "political" between tax and election law. Back to Top IRS Releases Regulations On Excess Benefit Transactions Between Nonprofits and "Disqualified" Individuals Effective January 10, 2001, new temporary regulations will govern sanctions against persons that exercise substantial decision-making powers in a nonprofit and receive excessive financial benefit as a result. The regulations will be in effect for three years, and the Internal Revenue Service (IRS) will issue final regulations after assessing the workability and impact of the temporary rules. The rules define an "excess benefit transaction" as one in which the economic benefit provided by a tax-exempt organization to or for the use of any disqualified person exceeds the value of the services rendered. The IRS has indicated that fair market value standard will be used to determine when a benefit is excessive. Both direct and indirect benefits are included. If the IRS determines that an excess benefit transaction has occurred, it can tax the disqualified person 25 % of the value of the transaction, or 200 % if it is not corrected within a set time. Managers that knowingly participate in the transaction can be taxed at 10 % of the transaction. However, managers are exempt if they have disclosed the transaction to attorneys or accountants and relied on their advice. Nonprofits engaging in excess benefit transactions risk losing their tax exempt status, depending on whether or not they have been involved in repeated incidents, the size and scope of the transactions, whether or not they have safeguards to prevent future abuse and whether or not they comply with other laws. The new rules have been published in the Federal Register at 26 CFR Part 53, 301, and 602, [TD 8920] RIN 1545-AY64. Back to Top Clinton Administration's Final Report on E-Commerce On January 16, 2001, the Clinton/Gore Administration released "Leadership for the New Millennium, Delivering on Digital Progress and Prosperity." This third and final annual report of the Electronic Commerce Working Group details the Administration's accomplishments over the past three years promoting electronic commerce and sets a vision for the future. The accompanying press release by President Clinton notes that "we are still at the dawn of the Information Age, and much more remains to be done to grasp its potential. We should use technology to advance our oldest and deepest values - dramatically increasing the number of people with disabilities who can work, lifting more families out of poverty, and putting access to a world-class education and cutting-edge skills at the fingertips of every American. These are challenges that are worthy of our great Nation." OMB Watch will provide a full review of the report in the next Watcher. Back to Top Clinton White House Moved to NARA At noon last Saturday, President Clinton's White House web site moved lock, stock and barrel to www.clinton.nara.gov. When the Clinton Presidential Library opens in the future, it will include the site that will be housed on the National Archives Records Administration (NARA) servers. While the motivation for the preservation of the site may have been as much political as historical on the part of the Administration, both they and NARA are to be commended for ensuring that the transfer of these records proceeded efficiently and apparently without pressure. The preservation and accessibility of this digital information sets a valuable precedent for the new Administration. Back to Top Agencies Directed to Archive Websites Following on an Office of Management and Budget (OMB) "heads up" to agencies sometime during the week of January 8, the National Archives issued - on Friday, January 12 - a memo and guidelines directing agencies to "take a snapshot of your agency’s public web site(s)," and to "within 60 days, send the snapshot and related documentation to NARA." The intent is to preserve a "one-time snapshot of agency public web sites as they exist on or before January 20, 2001, as an archival record in the National Archives of the United States" and "to document at least in part agency use of the Internet at the end of the Clinton Administration." The end of the Clinton Administration is both a historical break meriting historical documentation and a political break in control over the content on agency websites. Because the following Monday was a federal holiday, many agency webmasters did not learn of the request until Tuesday, January 16. The requirement has caused a maelstrom of consternation in at least some agencies. Issues of time, money and personnel to complete both the snapshots and the required documentation (although one would assume that the documentation of the technical details behind the visible pages would not change from January 19 to January 20) have been raised, as have questions about some of the technical requirements in the NARA guidelines. We will follow the progress of this federal government family album. Back to Top Chemical Accident Right-To-Know: With 2 New Systems, EPA Again Makes Access Restrictive The Environmental Protection Agency (EPA) welcomes public comment by March 19, 2001, on two systems to allow "qualified researchers" to access data on worst-case chemical accident scenarios and provide the public with a way to view electronic versions of the reports to compare companies across the country, according to an EPA notice in the Federal Register. The public likely will not be able to identify the names or locations of facilities when viewing chemical accident data, even though that information is already available and on the internet. This proposal further erodes the public's ability to identify health and environmental risks and the sources of thoses risks. Under mandate by law to provide public access to chemical accident data without increasing the chances that the information could somehow be used to harm the United States, EPA may provide the chemical accident data reported under the RMP program without divulging the identity or locations of any of the plants reporting the data. Researchers seek access to identify specific facilities in order to sort out similar facilities and compare safety procedures and environmental risks posed by different types of facilities across the country. Public interest and environmental groups argued that the public needs this information in a centralized national system in order to identify local facilities and the population and area in the surrounding community at risk from a chemical accident. Congress several years ago created a Chemical Safety Board to investigate and help prevent chemical accidents in the United States. One government study concluded that many abortion clinics are better protected than chemical facilities, but Congress imposed limits on the public's right-to-know without mandating steps to improve the inherent safety of chemical plants. Back to Top EPA Seeks Public Input on Public Participation Process Twenty years ago, the Environmental Protection Agency (EPA) developed policies for including the public in decisions protecting the environment and human health. While technology, the agency's responsibilities, and new regulations have changed the work EPA does, the policies were never updated. Until now. Focusing especially on ways of strengthening the involvement of low-income and underserved populations in environmental decision-making, EPA is accepting public comment until April 27, 2001, on a draft revision to its 1981 policy on public participation to reflect changes in technology (including the Internet), EPA's responsibilities, laws and regulations, according to a Federal Register notice published on December 29, 2000. The proposed changes stem from a review by an EPA work group of the various public participation requirements of different EPA programs. A report outlining the work group's recommendations along with the proposed policy changes is now available online. Back to Top Tech Help: Internet Telephone Services The Internet is often touted as the means to make just about everything faster, more efficient, and cheaper, but when it comes to telephone calls, should you bother to use it when you have a device called a telephone sitting right in front of you? NPTalk weighs whether Internet telephone services can ring your bell or should remain off the hook... Subscribe to NPTalk Back to Top Letter to the Editor: Estate Tax Series Good work on the estate tax info. Who is putting this stuff together for you? I'd like to see if we could get some enviros - especially land conservation types - to get involved in this issue. I'm especially interested in your advertized info about who benefits from bequests, etc. Gawain Kripke Friends of the Earth [Response to "The Estate Tax and Charitable Giving," OMB Watcher Online, Vol. 2 No. 1 and "Repeal of the Estate Tax to Move Quickly?," OMB Watcher Online, Vol. 1 No. 24] Back to Top Notes and Sidebars MAKE YOUR VOICE HEARD! SIGN ONTO THE INVEST IN AMERICA STATEMENT OF PRIORITIES The Invest in America coalition continues to press for increased domestic investment in programs that will provide opportunities to low-income people and create stronger and safer communities. We have revised our original Statement of Principles and will be sending the new Statement of Priorities to the Administration and Congress. We hope to get even more organizations on the list of supporters, so sign on now! ACLU Issues Report on Ashcroft Civil Liberties Record On January 16, 2001, the ACLU Washington National Office today issued a new report that has been distributed to all 100 U.S. Senators. The report - "Not Moderate, Not Compassionate, Not Conservative: John Ashcroft's Radical Revisionism Of Basic Constitutional Values in America" - examines the Ashcroft record on civil rights and liberties. Social Justice Movements and the Internet The Peace Review Journal, an international and multidisciplinary journal of peace, social justice and human rights, is seeking papers for a special issue on social justice movements and the Internet. This issue aims to examine whether the Internet is really a significant force for progressive political practice and how social justice movements are using the Internet. More information, including the Peace Review's Writer's Guidelines and suggested topics, is available online. In addition, questions may be addressed by e-mail to Dorothy Kidd or Bernadette Barker-Plummer or by calling 415.422.6680. The Century Institute Summer Program for Undergraduates Applications are now being accepted for The Century Institute Summer Program, a two-week fellowship designed to introduce undergraduate students to the progressive tradition in American public policy. The program will be held at Williams College in Williamstown, MA from July 1 through July 14, 2000. The program is open to any student who is a sophomore or junior in the 2000-2001 year, who has an interest in public policy and civic engagement. More information and an application is available at the The Century Institute's web site.